'Work perks' enjoyed by millions are under attack by HMRC

HMRC has launched an attack on work perks being offered to millions of staff at UK firms, in a bid to cut the cost of popular schemes which are designed to reduce people's tax bills.

It is considering preventing the UK's biggest companies from using their bulk buying power to offer workers the chance to buy discounted cars, laptops and mobile phones from their gross salary, allowing them to pay less tax.

The move would reduce the cost of the scheme to taxpayers and address concerns about potential unfairness as staff at larger firms are more likely to benefit than those at smaller firms.

On Wednesday the taxman quietly launched a consultation to reform salary sacrifice schemes, which let employees swap chunks of their salary for taxable or non-taxable perks.

The arrangements let staff access goods and services at a discounted price and reduces their tax bill by letting them pay for items before tax is deducted from their salary.

Perks such as discounted mobile phones offered through work could be about to be endedCredit:
SeongJoon Cho

For example a £700 mobile phone contract bought through a salary sacrifice scheme would save a higher-rate taxpaying employee £294 and their employer would also save £97. The total cost to the exchequer would be £391.

The Government first indicated it was worried about the rising cost of salary sacrifice in last year's Summer Budget 2015. It will now decide if some items should be excluded from the scheme all together.

According to the consultation paper the Government is still concerned about the growth of salary sacrifice arrangements and their fairness on the tax system.

In his 2015 Budget George Osborne raised concerns about the cost of salary sacrifice schemesCredit:
Mark Thomas/REX/Shutterstock

It said: "The way in which benefits are provided has also evolved, with a growing market for flexible benefit packages, often combined with salary sacrifice arrangements. This growth represents an increasing cost to the Exchequer and creates an uneven playing field between employees and employers who use such arrangements and benefit from the tax advantages, and those that don’t.

"We want employers to continue to offer benefits to their employees, but need to balance this with the interests of all taxpayers." Employer pension contributions, employer-provided pension advice, employer-supported childcare and provision of workplace nurseries and cycles and cyclist’s safety equipment provided under the cycle to work scheme will remain unaffected by the measure."

Adrian Lowcock, investment director, at Architas, said: “The salary sacrifice scheme has grown organically over many years and as such it is right to review its usefulness and relevance. However, the timing could have been better. The Government are in a difficult place, with the UK economy reeling following the Brexit vote, they need to balance the books whilst also encouraging businesses to come to the UK and boost consumer confidence.”